Tax Alert: Connecticut 14-Day Nonresident Withholding Rule
12/22/2009
On December 2, 2009, the Connecticut Department of Revenue Services issued Announcement 2009(9) establishing a new de minimis withholding tax rule applicable to nonresident individuals. Pursuant to the Announcement, an employer is no longer required to withhold income taxes on wages paid to an employee if:
- The employee is assigned to a primary work location outside of Connecticut;
- The employee works in Connecticut 14 or fewer days during a calendar year; and
- The employee is a nonresident of Connecticut.
For purposes of the “14-day” rule, any part of a day spent performing services in the state is considered a full day. If an employer expects that a nonresident employee will work more than 14 days in Connecticut during the year, the employer must withhold on all wages paid to the employee. If the employer reasonably expected that a nonresident employee would not work more than 14 days in a given year but in fact the employee does work more than 14 days, the employee must begin withholding tax on all wages paid to such employee after the 14th day.
This Announcement only applies to an employer’s obligation to withhold taxes. Regardless of whether tax is withheld, the nonresident employee is liable for Connecticut income tax on all Connecticut source income and must file a Connecticut individual income tax return.
This new rule, however, does not apply to nonresident athletes or entertainers (see Policy Statement 2008(1), Income tax Withholding for Athletes or Entertainers for greater detail).
For more information on this and other State and Local tax matters, please contact your J.H. Cohn advisor or Patrick J. Duffany, J.H. Cohn state tax partner, or Brenden M. Healy, manager, at 860-633-3000.
Patrick J. Duffany, CPA, J.D., is a tax partner in J.H. Cohn LLP's State and Local Tax Group, where he specializes in multistate taxation issues with an emphasis on New York and Connecticut state tax issues. He may be reached by email or at 860-368-3607.
Brenden M. Healy, CPA, is a is a tax manager in J.H. Cohn's State and Local Tax Group. He may be reached via email or at 860-368-5246.
Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing or recommending to another party any tax related matters.